Zeroing in on a problem?

March 2016

Throughout 2015 the Internet was abuzz with news, articles, blog-posts, and opinions on the relative merits of policies on zero-rating. Defenders of zero-rating claimed lower prices, and lower cost of access to information, with the potential to reduce the digital gap, in particular in less developed countries. Opponents argued that discriminating by content might reduce consumers’ choice and distort competition by penalising startups and favouring big players; mobile operators might lower their subscribers’ monthly data limits in order to increase the attractiveness of their own zero-rated services.

Reflecting these different perspectives, regulators and network operators around the globe have indeed been taking different approaches towards zero-rating.

For example, although zero-rating is usually a favourite marketing tool for operators, some seem to be testing new strategies or changing their mind. A few months ago TIM Brazil announced the end of a zero-rating agreement with WhatsApp which it had signed only in 2014. While TIM executives recognised that offering traffic through WhatsApp for free increased data usage and captured new customers, the operator is now pursuing a strategy of increasing subscribers’ data caps overall. Its competitor Vivo/Telefónica has never offered zero-rating, arguing that the firm had adopted a strategy focused on quality and on delivering the best experience on data usage in the country and that zero-rating policies could saturate the network downgrading the experience of other users.

The Indian Telecommunications Regulatory Authority announced at the beginning of February 2016 that price differentiation and thereby zero-rating will no longer be permitted in the country.1 Just a couple of weeks earlier the Brazilian government launched a public consultation on what exceptions might be made to its 2014 net neutrality rules, which included zero-rating agreements between operators and content providers. Although Chile was one of the first countries to adopt net neutrality rules in 2010, the regulator decided to ban zero-rating practices only four years later, albeit with some exceptions for not-for-profit such as Wikipedia Zero. In December 2014, the Dutch Authority for Consumers and Markets (ACM) fined KPN and Vodafone for infringement (in Vodafone’s case for offering HBO content for free during a three-months mobile app campaign).2 As both KPN and Vodafone claimed that the net neutrality provisions were not clear the Dutch Ministry of Economics Affairs issued a guidance note on net neutrality in March 2015. In Slovenia the National Regulatory Authority banned zero-rating practices to two mobile operators in January 2015, in spite of a different position taken by the Slovenian Competition Authority which “considered that per se prohibition of zero rated services might be detrimental rather than beneficial for consumers and that the assessment of the legality of the mobile operators’ offers should be based on the effects of provision of such services.” Other European countries have yet to take a position on zero-rating.

In this, they will have to follow the so-called Telecom Single Market Regulation3, which also establishes ‘common rules to safeguard equal and non-discriminatory treatment of traffic in the provision of internet access services and related end-users’ rights’.4 In general terms, the European net neutrality rules propose ex-post regulation in relation to zero-rating: national authorities will be required to monitor the evolution of the market and intervene in case of abusive or unfair commercial agreements. BEREC is tasked with developing,the guidelines for monitoring compliance by the national regulatory authorities by 30 August 2016 and has so far presented the main questions that it considered would need to be addressed in the guidelines for monitoring the implementation of net neutrality rules, including commercial practices that cover zero-rating. However, only the public consultation scheduled for June 2016 will unveil the detailed proposals.

In any case, these detailed proposals will ultimately imply that Member States will have to deal with zero-rating in a harmonised way. In the face of different approaches taken in Member States such as the Netherlands and Slovenia to date, this will inevitably cause dissatisfaction. Zero-rating is a highly controversial topic and is far from clear that the right approach to zero-rating is the same in different geographical markets. More evidence on the effects of zero-rating may need to be collected to weigh the pros and cons of the different policies – and transparency and consumer awareness of traffic management strategies and commercial practices will need to be part of the equation.

In 2015, Vodafone had delayed the implementation of its zero-rating strategies, after the controversial entrance of Internet.org (which is available in more than 35 developing countries within Africa, Asia Pacific and Latin America) and the debate generated around the potential anti-competitive effects. [↩]

Regulation (EU) 2015/2120 of the European Parliament and the Council of 25 November 2015. [↩]

In general terms the rules specify: 1) the right to access and distribute content and information, 2) equal treatment of traffic for the provision of internet access service, 3) reasonable traffic managment, 4) restrictions on the processing of personal data, 5) the provision of services optimised for specific content, other than internet access services and 6) a set of transparency measures. [↩]

DotEcon Online Seminars

DotEcon runs an online seminar programme about topics of general interest linked to our work. Past online seminars have covered, for example, spectrum auction design, e-commerce and its impact on competition, or the role of regulators in disputes amongst firms.Our seminars are by invitation only, with invitations usually being sent around a week before the seminar is run. If you would like more information or be kept up-do-date with the programme in general, please send us an email.